Monday, July 26, 2004

North Korea Goes Commercial Online

According to Reuters, there is a new North Korean website -- the Naenara ("My Country") site at www.kcckp.net -- the third North Korean website, whose novelty is its emphasis on commercial opportunities in North Korea:

KCNA has been available on the Internet for about five years on the Japan-based site www.kcna.co.jp. Another North Korean site, www.uriminzokkiri.com, publishes Pyongyang views from China.

The new portal provides the North Korean telephone numbers of state trading companies that offer products raging from "stylish dresses of fine workmanship" to ferrous and nonferrous metals. ("N.Korea Opens Pilot Web Portal, Glitches Remain," July 14, 2004)

From the same Reuters article, the reader also learns that "[t]he launch follows the start of online gambling [!] run by the North two years ago and an online shopping mall in the South that sells goods imported from the North" (emphasis added, "N.Korea Opens Pilot Web Portal, Glitches Remain," July 14, 2004).

It is a German company KCC (Korea Computer Center)-Europe that created and maintains www.kcckp.net, which may compound translation troubles all too common in communication between East Asia and English-speaking regions of the world, if the company is translating documents from Korean to German to English. The owner of KCC-Europe is Jan Holtermann, an adventurous and optimistic entrepreneur:

A German, Jan Holtermann owner of the computer firm KCC Europe, is putting North Korea online.

He hopes that by being there first he will be able to eventually tap into North Korean computer talent.

The country's small number of internet users currently dial-up to Chinese providers, a costly process at about £1 a minute.

Mr Holtermann's customers, who he hopes will number 2,000 by the end of the year, will have unlimited access for £400 a month.

As only a few North Koreans are permitted to have telephones, and as the internet service is costly, Mr Holtermann expects his customers to be government ministries, news agencies and aid organisations.

He has invested £530,000 in the venture, intending to get first pick when North Korean software programmers come onto the market.

"They are very talented," he says.

"It's this capacity we want to sell in Europe." (Lucy Jones, "Foreign Investors Brave North Korea," April 13, 2004)

According to Netcraft, www.kcckp.net is run on Linux. Take that, Microsoft!

Pyongyang's net venture is merely one aspect of the slow but certain transformation of North Korea into a capitalist economy.

The Washington Post reports on "the bustling site of North Korea's first capitalist industrial park," which it hails as "a new symbol of progress" -- the "progress" that creates winners and losers:

[T]he $180 million project just across the three-mile-wide Demilitarized Zone separating the two Koreas marks the most profound example of a 22-month-old experiment to bring the free market to one of communism's last frontiers.

Abuzz with activity as earthmovers clear land near the North Korean town of Kaesong for the first phase of five to 10 factories, the plants at Kaesong, to be owned and operated by South Korean companies, will employ up to 1,000 North Korean workers paid in U.S. dollars and receiving raises -- or dismissal slips -- based on performance. The long-term development plan calls for apartment complexes, hotels, restaurants -- even an amusement park by 2020.

"For North Korea, this is a first," said Jang Whan Bin, senior vice president of Seoul-based Hyundai Asan Corp., financed in part by the South Korean government. "The market system in this industrial zone will be more flexible than anything now existing in North Korea. It is more than symbolic. The North Koreans are eager to understand the free market, and now we're bringing it across the border for them to take part."

The Kaesong Industrial Park underscores mounting evidence that North Korea is undergoing its boldest attempt at economic reform since Kim Il Sung founded the Stalinist nation more than half a century ago.

With the end of the Cold War, North Korea lost hefty aid from Moscow and Beijing. The funds had propped up the economy, as did trade with other communist countries, and the loss of revenue sparked a financial collapse and bouts of starvation during the 1990s estimated to have killed as many as 2 million people. Bankrupt and desperate, the secretive Pyongyang government launched an experiment with the free market in July 2002, deregulating prices and hiking salaries.

No one expects the kind of societal transformation -- or foreign investment -- seen in China or even Vietnam while North Korea remains on its current path as a renegade nuclear power. But almost two years into its experiment, the reforms have spread far more deeply and quickly than many had anticipated, according to interviews with Asian and Western diplomats, business executives, aid groups and analysts, including a series of recent visitors there.

In addition to the industrial park, they noted new steps to phase out the state's food rationing system, the rapid proliferation of deregulated markets, attempts to reform state-run factories into profit-based operations, even the launch of a Web site selling "Made In North Korea" products over the Internet.

Since reforms went into place, North Korean trade with China jumped 38 percent to $1.02 billion in 2003; trade with South Korea spiked 12 percent to $724 million. In Pyongyang, the capital, eyewitness reports suggest a consumer culture is on the rise, with a proliferation of new markets selling oranges from Spain and electronics from China without state-set or subsidized prices. Many of these enterprises deal in dollars or euros. Smaller, independently run kiosks also dot the urban landscapes, selling cigarettes and soda pop.

Capitalist advertising -- roadside billboards peddling the Whistle, a type of Fiat assembled in North Korea -- has gone up along highways peppered with more and more late-model cars. The number of cell phones in the capital has reportedly soared from 3,000 in 2002 to an estimated 20,000 today.

North Korean ruler Kim Jong Il -- who succeeded Kim Il Sung, his father, following the latter's death in 1994 -- has dispatched special emissaries to China and Vietnam to further analyze the economic openings there, according to Ban Ki Moon, South Korea's foreign minister. During a surprise summit with Chinese leaders last month, Kim spent an entire morning touring a village outside Beijing touted by the Chinese as a model for introducing private enterprise and extending ownership rights. . . .

. . . [B]y most accounts, those who thrived under the communist system had connections to the government, the military or black market. These officials have capitalized on the new system with increased access to imported goods and new ways to use their connections to benefit from the legalization of open commerce -- particularly in markets and trading on the Chinese border. Mid-level government officials, for instance, have become notorious for stripping abandoned factories of scrap metal and selling it to the Chinese, South Korean intelligence sources said.

By contrast, those at the lower rungs of society -- especially in rural regions far from the relatively prosperous capital -- face even greater challenges now, battling soaring inflation as government-set prices and state rations steadily disappear.

The U.N. World Food Program now calculates that 6.5 million of North Korea's 22 million people are facing food shortages this year. Those figures include a "new underclass" generated by the experiment with market reforms, according to Tony Branbury, the WFP's Asia director.

"When there are broad economic reforms in any society, there are going to be winners and losers, and clearly, in the case of North Korea, the reforms have created a new class of losers," said Branbury, who last month concluded an extensive fact-finding mission in North Korea.

On a rare tour through five North Korean cities including Pyongyang, Branbury and his team observed the polarizing power of the economic changes. In Pyongyang, he witnessed a proliferation of cars and cell phones -- which, according to South Korean government officials, are available almost exclusively to Communist Party members, the only North Koreans who can afford the approximately $1,000 registration fee.

At the same time, WFP officials noted the rise of urban slums populated by those living in increasingly desperate conditions. Although North Korea has raised workers' salaries approximately sixfold, prices for staples including rice have gone up ninefold or more.

North Korea once paid even idled factory workers, but many have now been reassigned to menial jobs with lower pay. "I could see workers, who we were told once worked in factories, sweeping up dirt on the sides of rural roads in the middle of nowhere," Branbury said. "The government is redistributing jobs as it can, but the North Korean authorities told us they recognize there is a problem with a new group of vulnerable people excluded from the so-called economic reforms." . . .

Nevertheless, the North Koreans appear to be forging ahead. Most of the factories still functioning in North Korea, for instance, must now meet payrolls based on their own profitability. Managers, rather than Communist Party officials, have been vested with more power to make independent business decisions. A central bank in Pyongyang is offering loans, rather than government subsidies, to state-run factories. (Anthony Faiola, "A Capitalist Sprout In N. Korea's Dust: Industrial Park to Broach Free Market," Washington Post, May 23, 2004, p. A18 )